Cavium to buy MontaVista Software for $50 million

SAN FRANCISCOCavium Networks has signed a definitive agreement to acquire embedded Linux software vendor MontaVista software for $50 million in cash and stock, the company said Tuesday (Nov. 10).

Under the terms of the deal, which is expected to close in December, Cavium (Mountain View, Calif.) will pay $16 million in cash and $34 million in Cavium stock to acquire MontaVista, the company said. The amount of stock represents about 4 percent of Cavium's outstanding shares, according to company executives.

Cavium plans to maintain MontaVista as a separate company, according to Syed Ali, Cavium president and CEO. The company will maintain separate sales, engineering and product management staffs, he said in an analyst conference call following the acquisition announcement.

Ali said software is becoming a bigger bottleneck and that Cavium is seeing an increase in demand for more complete solutions. Customers are demanding that Cavium provide a "one stop shop" for their hardware and software needs, Ali said.

Ali noted that the acquisition will allow Cavium to monetize design wins through the sale of software tools prior to the time when an end product goes to market, which can be two to three years down the road.

The Cavium-MontaVista deal is reminiscent of Intel Corp.'s acquisition of embedded software specialist Wind River Systems Inc. for $884 million earlier this year.

From MV's own news archives:
Jan. 2001 -
"The company also secured over $30 million in funding from key investors, including Intel Corporation"
March 2002 -
"MontaVista announced the investment Tuesday, but didn't disclose how much Panasonic is investing."
April 2004 -
"MontaVista Software, Inc., the company powering the embedded revolution, today announced four new investors - Siemens Venture Capital, which leads the funding, as well as Samsung Ventures America, Infineon Ventures and China Development Industrial Bank. These investments in MontaVista Software, an embedded Linux platform and tools supplier, increase the company's cash reserves by $7 million. The total investment in MontaVista Software, since it was formed in 1999, is now more than $72 million."
Dec. 2006 -
"MontaVista Software, Inc., the leading global supplier of production-quality embedded Linux operating systems and development tools, today announced it has secured $21 million in funding led by Siemens Venture Capital. Also participating were NEC, Alloy Ventures, US Venture Partners, Aplix and others"
They make it all sound so exciting and certainly if your business is to get funding and burn it, then they did a great job! At least $83M turned into $16M cash and stock that itself may or may not be worth anything!
Great job Jim Ready, can you say Ponzi?